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On the non-neutrality of socially responsible investing in the presence of a greenium

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  • Alex, Fabian

Abstract

The neutrality of SRI in the AD-GE model by Arnold (2023) ceases to hold once the law of one price is violated for an asset that sufficiently many individuals (a single one may suffice) are not indifferent towards. The introduction of a green bond priced at a premium leads to an illusory gain, that is, a pure utility gain accompanied by a reduction of consumption, of green investors. Their financial losses are allocated to those that were sufficiently un-green to not buy too many green bonds themselves. To profit financially this way, an individual needs to start out as (partial) owner of a firm that “turns out” to be a green bond issuer. Impact investing still does not generate environmental impact in this model.

Suggested Citation

  • Alex, Fabian, 2026. "On the non-neutrality of socially responsible investing in the presence of a greenium," The North American Journal of Economics and Finance, Elsevier, vol. 82(C).
    • Handle: RePEc:eee:ecofin:v:82:y:2026:i:c:s1062940825002074
    DOI: 10.1016/j.najef.2025.102567
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    JEL classification:

    • D53 - Microeconomics - - General Equilibrium and Disequilibrium - - - Financial Markets
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G41 - Financial Economics - - Behavioral Finance - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making in Financial Markets
    • M14 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - Corporate Culture; Diversity; Social Responsibility
    • Q59 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Other

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